A Transaction Data Analysis of Nonsynchronous Trading

Posted: 18 May 1999

See all articles by Douglas M. Patterson

Douglas M. Patterson

Virginia Polytechnic Institute & State University

Gregory B. Kadlec

Virginia Polytechnic Institute & State University - Pamplin College of Business

Abstract

Weekly returns of stock portfolios exhibit substantial autocorrelation. Analytical studies suggest that nonsynchronous trading is capable of explaining from 5 to 65 percent of the autocorrelation. The varying importance of nonsynchronous trading in these studies arises primarily from differing assumptions regarding nontrading periods of stocks. We simulate the effects of nonsynchronous trading by sampling stock returns from a return generating process using transactions data to obtain the precise time of each stock?s last trade. We find that simulated weekly portfolio returns exhibit autocorrelations that are roughly 25 percent that of their observed (CRSP) weekly returns.

JEL Classification: G12, G14

Suggested Citation

Patterson, Douglas and Kadlec, Gregory B., A Transaction Data Analysis of Nonsynchronous Trading. Available at SSRN: https://ssrn.com/abstract=161665

Douglas Patterson

Virginia Polytechnic Institute & State University ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States

Gregory B. Kadlec (Contact Author)

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-4316 (Phone)

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